Tenaris, Monday's IBD Stock Of The Day, is the leading producer of steel pipe for the oil and gas industry. Shares are rising as the company cashes in on higher demand, as companies and countries sever their energy ties to Russia following its invasion of Ukraine. In Monday stock market action, Tenaris stock jumped past a key level amid a further rise in oil prices.
Tenaris is part of IBD's Steel-Producers industry group. The group surged as steel prices rebounded on the heels of Russia's invasion of Ukraine. The overall group has since retreated, along with steel prices, as U.S. steelmakers increase output and the Federal Reserve aggressively tightens policy to slow the economy. Nucor stock sank more than 5% on Monday, making it among the S&P 500's worst performers.
The World Has Changed
Yet Tenaris, which is headquartered in Luxembourg, part of the European Union, has been showing its mettle, thanks to its energy industry focus and global reach.
"Since our last conference call, the world has changed," CEO Paolo Rocca said on an April 28 earnings call.
"Drilling activity is increasing around the world led by North America and the Middle East," Tenaris said in its earnings statement. "Offshore drilling activity is also increasing, led by Latin America. Pipeline project activity is also increasing in the Middle East, South America and the Mediterranean and Black Seas."
The sudden pickup in activity amid low inventories in North America and the Middle East has contributed to higher prices.
Tenaris grew sales 15% in Q1 vs. Q4, while revenue doubled from a year ago, driven by higher prices and increased shipments. Meanwhile, earnings per share surged 373%.
The company's outlook calls for further increases in dollar sales and volume in Q2 and the second half of 2022, with margins remaining steady as higher prices compensate for increased raw materials costs.
Tenaris Stock
Tenaris stock jumped 4.6% to 32.35 in Monday stock market action. Monday's move came after TS stock reclaimed its 10-week and 50-day moving averages on Friday.
In addition, Tenaris stock broke above a downsloping trend line that connects its April 18 high and its May 4 rally attempt.
That puts the stock in a buy zone on a rebound from its 10-week moving average, a buy opportunity offering exposure to one of the market's strongest sectors: oil and gas. The buy zone runs to around 10% above the level of the 10-week line.
TS stock's weekly chart also shows successive tight weekly closes right at the 10-week average. Those occurred as the stock tested support in a couple of midweek drops below the key level. Tight weekly closes can indicate strong institutional support.
Be sure to read IBD's The Big Picture column after each trading day to get the latest on the prevailing stock market trends and what they mean for your trading decisions.
